Charles Lysaght: New legal regulations will not hurt lawyers’ fees

The Legal Services Regulation Bill, now before the Seanad, is unlikely to reduce lawyers’ fees as it does nothing to make competition more effective.

Consumers can only benefit from competition if they are in a position to ascertain which supplier offers best value in quality of product and in price. In the case of legal services, prospective clients seldom have the experience or expertise to assess the relative merits of competing lawyers.

In areas such as litigation, where the amount of work involved can seldom be anticipated with certainty when a lawyer is first engaged, the prospective client is not entitled to be quoted a definite figure to compare with what is on offer from other lawyers.

The only entitlement of the client is to be informed of the criteria according to which the lawyer’s fee will be determined.

These criteria are inevitably wrapped up in such vague verbiage – or are so imprecise – that they allow considerable latitude to the lawyer when it comes to naming that fee.

The protection offered to the client when presented with a bill is a right to refer it to an officer of the court who decides if the amount charged exceeds the going rate.

In this process, the odds are stacked against the client. There are short time limits within which the client must move. To dispute a bill effectively, a legal costs accountant must be employed; that does not come cheap. Unless the bill is reduced by at least 15 per cent, the client is liable also to pay the court fees and the costs incurred by the lawyer defending the bill.

Cost of adjudication

This is unjustifiable and has the effect that few clients refer the charges of their lawyers to this adjudication. A lawyer who does not quote a precise fee to a prospective client should bear the cost of adjudication if the fee charged is judged to be too high. This is what happens in litigation where the charges of those supplying other goods and services are disputed and they recover less than they are offered.

Our system protects lawyers who overcharge and, by so doing, inflates the going rate for legal fees. It puts once-off litigants, who predominate in family law and personal injuries cases, at the mercy of their lawyers. They have not the muscle enjoyed by repeat business clients who may move their custom to another lawyer if they are overcharged or underserved.

The Legal Services Regulation Bill also reduces competition between lawyers by prohibiting fees that are expressed as a percentage of the amount recovered in litigation. Such percentage fees are permitted in other common law countries. They may afford prospective clients a basis for comparing the fees of different lawyers and so make the market more competitive.

Litigants are deterred not only by the fees that their own lawyers charge but even more so by the prospect that if they lose they will have to meet their opponent’s costs.

The Bill does nothing to discourage litigants with deep pockets from running litigation expensively and saddling their opponent with their high fees and outsize costs, even if that opponent has conducted a case more economically.

Low-cost regimes

This is most oppressive in areas such as judicial review and company law where it is not possible to litigate in the circuit court or district court and have the protection of their low-cost regimes.

The Legal Services Regulation Bill, which has dealt the Bar a few blows, is a triumph for the solicitors' Law Society with its slick PR machine, among whose antics is the award of prizes to legal journalists who are their most feared critics and the provision of briefings for members of the Oireachtas.

Not alone are solicitors’ earnings protected but they are also to be allowed to limit their liability for negligence for the first time.

They have retained the right to exercise the lien condemned by the Competition Authority that allows them to retain a client's papers until they are paid fully. This inhibits dissatisfied clients seeking to switch solicitors.

The Dáil has failed miserably to identify obvious shortcomings in the Bill. Let us hope that Seanad Éireann can justify its recent reprieve by doing better at the committee stage coming up shortly.

Charles Lysaght, who lectured on competition law at London University, is the author of a study of the Competition Authority Report on Solicitors and Barristers (2006), which preceded the introduction of the Legal Services Regulation Bill